BK Opportunities Fund 6 - Crystal Fund

BK Opportunities
Fund 6

Quarterly Report | 31st December 2022

BK Opportunities Fund-6 will make its quarterly distribution to its investors for the 31st December 2022 quarter-end of 1.75% (cash-on-cash, non-annualized) of its Contribution Amount (in USD). Payments will be wired on the 1st of February, 2023.

Furthermore, the N.A.V. of BK Opportunities Fund-6 as of 31st December 2022 after the distribution is 80.49%.

BK Opportunities Fund-6 net performances as of 31st December 2022 are:
December 2022 Monthly Return (non-annualized): 2.6%
December 2022 Year-to-Date Return (non-annualized): -5.4%
December 2022 Annual Return since inception: +1.1%
Cumulative Distributions inception/May 20192: 22.3%
Cumulative Return since inception/May 2019 (Distributions + NAV gain)1: +3.2%

(1) Based on the weighted average return of all classes since their respective closing date.

Market Commentary & Portfolio Overview

The surprisingly abrupt end of the zero COVID policy in China provided the world economy with a boost. The normalisation of the economic conditions in China eased many breaks in international trade. Aside from inflation, the US economy shows signs of resilience.

The Economy: Beating Expectation

Beating expectations, the gross domestic product rose at a 2.9% annualized pace, down from 3.2% in the third quarter. Few reports on labour markets pointed toward a resilient economy. The latest report showed annual inflation was 6.5% in December. Even if inflation is still uncomfortably high, this is the sixth month of the rate falling, pointing toward an improvement. The Fed is expected to hike rates by another 25 basis points next week. Investors' consensus is that the Central Bank is approaching the end of its tightening cycle. Dissident voices are heard, and Fed officials are signalling that rates will stay high until inflation is beaten. The scenario for a “soft landing” of the US economy is becoming much more realistic than ever before. In this scenario, tighter monetary policy cools household spending and lowers inflation – but avoids squeezing the economy so hard that it ignites mass layoffs nationwide. The only cloud in this picture is consumer spending. While consumer spending on services drove the economy to solid growth in the fourth quarter, there is concern that consumers will slow down.

Corporate Markets: Uneven Earnings

Even if GDP is solid, many companies are adapting to the new world order. Big tech started laying off. For example, Google announced a staff reduction of 12,000 people. It is important to remember all those companies kept hiring for many years, and after those layoffs, Google still has more employees than last year. Oil majors also announced losses on the back of low energy prices from the last quarter. It can be interpreted as the adaptation to the end of cheap money and the future global growth perspective. It is consistent with the idea that many underperforming companies did not display their true value in a low-interest rate environment but started to now re-adjust. The timing for the massive short against the companies linked to Indian billionaire Gautam Adani is a symptom of this trend to go back to realistic valuation. Overall, US corporations are well positioned to gain from a more stable and possibly healthier world economy. China re-opening opens to perspective to trade and tourism growth.

Corporate Loans: Stabilisation

The S&P/LSTA default rate has continued to decrease since September to 0.68% by issuer number and only 0.72% by principal amount. We are still very much below industry averages. Corporations have been able to adapt to inflation and to the new world order. Their strong balance sheet and the better economic environment helped their credit situation.

CLO Market: Continuum Market

Total U.S. CLO new issue volume for 2022 was $129.32 billion, far short of the all-time record $187 billion seen in 2021. New issuance volume in 2023 is likely to range from $100 billion to $120 billion as CLO tranche spreads tighten somewhat from their current levels but remain much wider than historical levels. U.S. bank treasury departments, which took a low profile for the last two years, are likely to re-enter the market gradually. The relative value versus other asset types and competing demands for money inside the banks should drive this interest. Current open CLO warehouse lines may support CLO new issuance in the first half of 2023, especially if loan prices rally. CLO resets and refinancings should resume once CLO tranche spreads narrow. 2023 level of reset and refinancing issuance may exceed the average of 2022.

BK Opp. Fund 6: Performances

BK Opportunities Fund-6 is making a distribution of 1.75% this quarter (payments will be wired on 1st February 2023), bringing the total distribution since inception to 22.25% non-annualized. Although robust payments, reset and trading activity this quarter, we received in total over 11%, we have allocated most of it for reinvestment, as we believe current prices are an opportunity to boost the fund’s performance.

The annual return since inception is +1.1%, well below our expectations, but the valuations of our portfolio, provided by counterparties, brokers and dealers, are very conservative. As an illustration, one of our reset positions of December (where BK-6 received 100% or its par) was priced end of November at 83.4%. Our portfolio is well positioned to resist downside while performing in most anticipated scenarios (even with an increase of defaults). As we collect coupons & principal (and distribute or reinvest them) and trade around our positions, the fund’s performance should increase and reach a level closer to our target.

Quarterly Summary

(1) Cash on cash, based on the Contribution Amount.
(2) Since the inception of BK Opportunities Fund-6, May 2019.
(3) Net Asset Value after distributions as of 30th June 2021, as a percentage of Contribution Amount.
(4) Sum of the cumulative distributions since inception and the 30th June 2021 NAV.

Fund and Market Performances as of 31st December 2022

(7) Based on the total return level of the JPMorgan CLO Index “CLOIE” for post-crisis CLO tranches rated BB (respectively B).
(8) Index designed to represent the overall hedge fund universe.
(9) S&P LSTA US Leverage Loan Index Total Return, sums principal, interest and reinvestment returns

Monthly Performances


Cumulative and Quarterly Distribution


Fund’s Summary

Currency USD
Fund’s Inception May 2019
Last Closing February 2020
End of Reinvestment Period February 2023
Maturity5 February 2025
Distribution Quarterly6
Investment Manager Oristan Ireland DAC
Administrator Apex Funds Services
Custodian CIBC Bank & Trust
Banker Northern Trust
Counsel Dillon Eustace
Auditor Deloitte
Bloomberg Page BKOPP6A KY
(5) Excluding the possible 2‐year extension
(6) First quarterly distribution made on 30th September 2020

Portfolio Manager
Olivier Gozlan


+44 208 089 11 35
This is not for distribution to, or use by, any person or entity in any jurisdiction where such distribution or use would be contrary to law or regulation. The information contained herein is for information only and does not constitute an offer regarding any product. The document has been prepared by Oristan Ireland DAC and the data have not been audited nor verified. Past performance cannot indicate future performance. There is no assurance that the investment objective will be achieved and investment results may vary.